Fiat Production In Serbia Fuels New Questions

Fiat Automobiles Serbia (FAS) has been officially open for two weeks now at the sprawling Kragujevac complex, the largest auto-making facility in Southeast Europe. Mass production of the new Fiat 500L begins this month, with the first order ready to hit showrooms by the Fall. Sergio Marchionne, director of Fiat Chrysler Group, is expecting to sell 160,000 of them.

“Exports from the factory next year will be worth between 1.1 and 1.3 billion euros,” Serbian Economy Minister Nebojsa Ciric told SETimes. The market is Europe and the US.

The new Fiat factory was built on the foundations of the old Zastava car complex. It was a giant in the industry 30 years ago, boasting over 53,000 employees and annual exports of 60m euros.

“Only the walls remained of the old factory,” Aleksandar Ljubic, an adviser at the ministry of economy and regional development, told SETimes. He explained that the new factory is equipped with the latest technology and is environmentally-friendly. In a daunting undertaking, Fiat has made the most modern plant for processing waste water, removing 1,000 tonnes of chromium and 10,000 tonnes of waste oil.

And there is good news for the nearby workforce. Since the beginning of the year, FAS has employed 256 new workers. By year’s end, the factory is expected to have 2,400 employees.

Yet there is some controversy surrounding the new plant. The timing, for one thing. Sceptics note it is re-opening just days ahead of the May 6th elections, suggesting it is a campaign ploy by the government.

Then there are the financing and other incentives provided by the government. Fiat first arrived in Serbia in 2008 when the government ceded the Italian partner 67% ownership of the old Zastava Kragujevac factory, along with other perks. Specifically, under the terms of the contract, Fiat invests 700m euros in the new factory, while the government constributes 200m euros. In addition, Serbia gives Fiat 10,000 euros for each new job created as well as attractive infrastructure improvements.

“Serbia is in fact investing in a foreign company, because Fiat’s investment in the factory is insignificant compared to the investment of Serbia,” says the campaign of former Prime Minister Vojislav Kostunica, ahead of the elections later this week.

Marko Blagojevic, operating director of the Centre for Free Elections and Democracy, the organisation that has monitored the elections process for the past ten years, says he’s seen this before. He says the opening of the Fiat factory just before the parliamentary and presidential election is reminiscent of the 2008 campaign. Parties in power then and now promoted Fiat as a major investment.

“The coalition around the Democratic Party … announced the arrival of Fiat in Serbia and had enormous political advantage . What had been the likely runner-up instead “broke out into first place” Blagojevic told SETimes.

And this time around, some pieces of the puzzle are missing. The Serbian public does not know what the terms of the arrangement are between Fiat and the government, or how the state will actually give money to this partner from Turin.

Six months ago, the Anti-Corruption Council demanded to see the contract. The ministry of economy provided it, but key sections regarding the government’s obligations were redacted, intentionally blacked out. The government has said it is due to a trade secret that Fiat does not want published.

One last issue is Fiat’s decision to produce the new 500L. Though the model is part of the small car category, it is a larger version of the Fiat 500. Some question the demand for a larger car given the volatile fuel prices. The base price for the 500L will be 16,000 euros.

Neighbouring Montenegro benefits from Fiat’s production as well. In February, company representatives signed a contract to ship the new cars through the port of Bar.

Montenegrin Minister of Transport Andrija Lompar says 95% of the Kragujevac factory production is involved. Montenegro is expected to make700,000 euros this year and up to 4m euros next year.

Serbian President Boris Tadic, who attended the factory’s opening last month, wrote in an article published in the newspaper Blic that growth in exports will be based on the automotive industry. He predicts a partnership with German manufacturers next.

SETimes

The Southeast European Times Web site is a central source of news and information about Southeastern Europe in ten languages: Albanian, Bosnian, Bulgarian, Croatian, English, Greek, Macedonian, Romanian, Serbian and Turkish. The Southeast European Times is sponsored by the US European Command, the joint military command responsible for US operations in 52 countries. EUCOM is committed to promoting stability, co-operation and prosperity in the region.